DETROIT (ResourceInvestor.com) -- In my previous articles, I have concentrated on providing current information on metals and groups of metals, so I have mostly mentioned and discussed companies in the mining and mineral processing industries. I got to thinking that the term 'natural resource' really covers a lot more than just mining metals and minerals and the production of energy resources such as coal, oil and gas. So today I would like to take a look at a different kind of natural resource company; one dedicated to the renewable production of agricultural products, i.e., a farming company.

There are a lot of publicly owned farming companies out there, both large and small. Well-known companies like Chiquita Brands [NYSE:CQB] or Del Monte [NYSE:FDP] abound, as do smaller ones like Calavo Growers [NASDAQ:CVGW] and Griffin Land & Nurseries [NASDAQ:GRIF]. However, in keeping with Resource Investor’s tradition of being the first to identify new start-up and growth (excuse the pun) opportunities, I would like to look at a small firm near San Diego, California, American owned and operated, called US Farms, Inc. [OTCBB:USFI], which recently came to my attention through a conversation with a friend in California.

US Farms is interesting in a number of ways: the crops that it raises, the new farming technology it has implemented and the potential for the growth in volume of these products resulting from some rather creative use applications and production techniques.

At first glance, US Farms looks like a fairly normal farming operation. It is a diversified farming and nursery company. The nursery unit, which provides a full range of ornamental products like Aloe Vera, Cactus, Jade, Palm Trees and Cycads, is a relatively small unit of the company, providing only about 4% of sales. The biggest revenue generator currently results from is the growing and brokering of the food crops, asparagus, tomatoes, and garlic, and the growing and harvesting of Aloe Vera for use as an ingredient of patent medicines and cosmetics.

In the first quarter of each year, US Farms is one of the largest U.S. growers of asparagus. Being in the temperate climate of Southern California allows US Farms to time its harvest to the December through March period where little domestic, American, competition exists, resulting in an ability to command premium prices. Tomatoes and garlic are sold throughout the year, with garlic being sold as fresh, dehydrated or seed stock. While severe competition for dried or dehydrated garlic from China is felt, most of US Farms’ output is sold as fresh and the brokering side of the business is able to benefit from marketing the Chinese dried product to its, US Farms,’ established customer base.

To effectively compete with other growers and importers, US Farms has implemented some “leading edge technology,” at least as it applies to a profession almost as old as man. One of these is the practice of ‘shade farming’. The company has a ‘shade house’, built at a fraction of the cost of a glass greenhouse, with a proprietary cover cloth that deflects the ultra violet rays of the sun. This keeps it from burning the plants and creates an environment that reduces plant stress and stimulates up to 35% above average growth. Coupled with a computerized watering system, you get “organic farming on steroids,” thereby improving returns.

The item I found most interesting however, was the Aloe Vera production and some of the plans US Farms have for marketing it. The company is very active in traditional Aloe Vera market, being one of the largest U.S. growers. It wholesales Aloe Vera leaves on a national basis selling bulk Aloe Vera, leaves and plants to grocery stores, and processors, as well as selling landscape and house plants through its greenhouse unit. It is the synergy of this ability to produce substantial quantities of Aloe and its in-place nursery business that may allow US Farms to strategically position itself in a future market for Aloe Vera and other such succulents.

Aloe Vera is widely known and used in homeopathic medicine. My grandmother used to refer to it as a ‘medicinal miracle’. In our family, we used Aloe Vera for everything from treating burns and cuts to hair and scalp treatment and even for treating constipation in babies. However, one aspect of Aloe Vera that most people don’t think about is that it doesn’t catch fire or burn very well. If fact, when I tried to ignite a (large) plant, it just melted on my barbecue and put out the fire. Being a large succulent, it should be pretty effective as a fire barrier. With all of the wildfires that have taken place in the San Diego area; this solid, typically grown as a, 2 ½-foot-high succulent may find popularity as a hedge-type plant that could afford added fire protection to property.

Aloe matures in about 2 ½ years, growing about a foot a year, and is about half water or ‘juice’. Being a succulent, it can survive drought, storing water, when moisture is available, in its leaves. These leaves can become fairly massive. Mature leaves sold by US Farms weigh up to 5 pounds and there are 8 or more to a plant. Imagine what a nice barrier a series of rows of Aloe would produce – plus they look nice and have attractive yellow flowers. As Kermit the Frog used to say, “it’s not easy being green,” especially during a drought in Southern California, but Aloe Vera manages to do it, and thrive. I understand that US Farms has actually broached the subject of Aloe Vera crops being grown for profit along California highway right of ways and, instead of paying to use the land, being paid to use it as a fire break filler.

The company has a number of other interesting approaches to the business, some of which are currently being put into place, which I can cover in future articles. One of the ideas under investigation is the potential of some of the cacti and succulents, including types of Aloe Vera, as a remediation crop for old mining properties. Aloe Vera will grow on some pretty sparse soil, with limited moisture required, so the plants might work in areas that don’t freeze and have soil with little contained humus. The latter tends to be a characteristic of many of the old strip mine properties.

One big difference that I see in US Farms, vs. many of the junior mining stocks I have reviewed, is a real cash flow. While not yet showing a profit, as the company is in a ramp-up period, and many of its plantings are yet to mature, they do generate a rapidly growing cash flow.

Sales, for the 9-month period ending September 30, 2007 (unaudited) grew from $214,509 to $6,802,764 over the same period in 2006, based on data contained in the company’s 10-Q. Accounts receivable are on the high side, again reflecting the ramp-up period, at approximately $2 million. In the long run, however, this represents future cash flow. Growth projections by the company are for sales in the $28 million range by the end of 2008, with a further doubling in 2009.

Taking a look at a natural resource company like US Farms might make sense for those seeking diversification in a natural resource oriented portfolio. It holds personal interest for me as Aloe was a form of homeopathic medicine I grew up with. Having an aloe ‘fire barrier’ that can double as a medicine chest might make a lot of sense to homeowners in fire-prone areas and could greatly improve the future prospects of companies like US Farms.

I believe that the current Chinese demand driven commodity boom is going to force a rational environmentalism on the U.S., because we either will begin again producing the metals and minerals we need or we either will not have them or have to pay such exorbitant prices for them that our consumer economy might be forced to re-price some common items, such as personal electronics, as luxury items.

Remediation of mining sites is a growing business; if it becomes a mandatory part of business planning for mining don’t say I didn’t tell you about Aloe Vera and US Farms.